Total Factor Productivity Growth in East Asia: A Critical Survey

Abstract

This paper surveys the empirical literature on total factor productivity (TFP) and the sources of growth in the East Asian countries. It raises the question whether the literature has helped us understand better the factors that have propelled growth in the region. The paper discusses the main theoretical aspects in the estimation of TFP growth, as well as the empirical results, and provides a survey of estimates of TFP growth for nine East and Southeast Asian countries. It is concluded that: (i) the main merit of the literature is that it has helped focus the attention of scholars on the growth process of East Asia, and has made countries in the region aware of the importance of productivity; (ii) the theoretical problems underlying the notion of TFP are so significant that the whole concept should be discarded; (iii) the TFP growth estimates are contentious: they vary significantly, even for the same country and time period, depending on assumptions and data sources; and (iv) research on growth in East Asia based on the estimation of TFP growth is an activity subject to decreasing returns. If we are to advance in our understanding of how East Asia grew during the last 30 years we need new avenues of research.